Markets rally after Fed raises rates

Saudi stocks lifted by banks; Dubai extends rebound

DUBAI, Dec 17, (RTRS): Bank stocks led gains in Saudi Arabia on Thursday, as investors bet interest rate increases would widen lending margins. Egypt rallied as its top bank agreed to sell a unit to a company owned by billionaire Naguib Sawiris.

Most Middle East markets rallied after the US Federal Reserve raised interest rates for the first time in more than nine years, a sign of confidence in the world’s largest economy.

Gulf currencies are pegged or closely linked to the dollar and Saudi Arabia, Kuwait, Bahrain and the United Arab Emirates all swiftly raised their own rates.

In Riyadh, National Commercial Bank climbed 2.4 percent, Al Rajhi Bank jumped 5.4 percent and Samba Financial Group rose 3 percent.

Saudi banks’ funding costs are perhaps the lowest globally, because most depositors put their money in non-interest paying current accounts for religious reasons, said Hisham Tuffaha, head of equity investments at Riyadh-based Mulkia Investments.

Therefore, traders have bought bank stocks on expectations higher rates will increase lenders’ margins, he said. Some bank stocks such as SABB, Banque Saudi Fransi and Saudi Hollandi are trading at trailing price to earnings ratios of less than 8.5, Reuters data shows.

“We’ve not seen PE ratios this low for seven to eight years. Valuations are very attractive even with the low oil price,” Tuffaha said. “We don’t have listed energy companies — for most sectors, where’s the direct link to oil?”

He forecast the Saudi market would bottom out, pointing to a combined PE ratio of less than 13 when the historical average is 16 to 17.

The Saudi index rose 2.6 percent to 7,046 points, taking its gains to 5.4 percent since Monday’s threeyear low.

Egypt’s Commercial International Bank (CIB) rose 5.6 percent after agreeing to sell investment banking subsidiary CI Capital to Orascom Telecom for 1 billion Egyptian pounds ($127.7 million).

Orascom Telecom, whose shares surged 11.1 percent, plans to merge CI Capital with Beltone Financial, which it bought last month for almost 650 million Egyptian pounds. Beltone rose 9.7 percent.

Sawiris previously made a failed bid for EFG Hermes, the largest investment bank in the Middle East.

“It’s not a surprise to see CI Capital as an alternative way to buy into Egypt’s investment banking sector,” said Allen Sandeep, director of research at Naeem Brokerage in Cairo.

Dubai’s index climbed 2.9 percent, rising for a fourth session since Sunday’s two-year low to trim its 2015 losses to 18.6 percent.

The market was up more than 10 percent in late July, but retreated as oil prices tumbled and investor worries grew over political instability, with a Saudi-led campaign in Yemen and Syria’s civil war showing no signs of abating.

Political risk will be a key factor in determining whether foreign investor activity on UAE markets will increase next year after slipping this year, said Marwan Shurrab, director at Dubai’s Vision Investments.

Saudi Arabia

The index rose 2.6 percent to 7,046 points.

Dubai

The index climbed 2.9 percent to 3,073 points.

Abu Dhabi

The index rose 2.1 percent to 4,148 points.

Qatar

The index rose 0.5 percent to 9,913 points.

Egypt

The index climbed 2.8 percent to 6,670 points.

Kuwait

The index slipped 0.02 percent to 5,624 points.

Oman

The index eased 0.05 percent to 5,359 points.